How to Choose the Right App Revenue Model

Choosing the right app revenue model is one of the critical questions to consider before launching. Generally, there are three main ways to monetize your app – charge per download, use in-app purchases or include ads within the app. Deciding on a revenue model depends both on your business strategy and the type of app you have.

Paid apps

The pay-per-download strategy is most commonly used for games or apps that offer unique services like photo editing. If your app is unique and potential users are not (yet) familiar with it, a version of this strategy called the freemium model is ideal. Freemium allows users to download the app and use its basic services for free in order to demonstrate the apps functionality and to convince the user to buy the premium version. Whether you charge a one time fee or go with a subscription model for the premium version, is up to you and depends mainly on the service offered.

In-app purchases

If you have an app based on reaching goals in order to gather virtual goods, in-app purchases could be the best monetization strategy for you. For example, the developers of Clumsy Ninja found a great way to engage users and earn money by allowing them to buy virtual goods for their main character. People often form emotional bonds and identify with fictional characters. This is where monetization considerations come onto the scene. Some users treat their characters as pets buying them goods and other things to help them achieve the best results within the game. Think about that next time you create a new app character.

If you don’t have virtual characters within the app, you should develop premium features that users are willing to pay for and that will make the app more valuable. For example, within our Sailing Tactician app we charge users for premium features and enable them to purchase these features for either seven days or one year. We knew that our users use the app only during the race season so we went with a time limited, in-app purchase monetazation model.

There is a third type of in-app purchase most suitable for online shops, e-commerce businesses and news apps. It is quite similar to the virtual goods strategy except that real-world goods are sold through the app.

In-app advertising

Finally, we have arrived at in-app advertising. Many apps use this method of monetization because it is the simplest way to earn money and promote your app. There are services like AdMob that will help you display ads within your app. AdMob is a Google service similar to AdSence and AdWords but for mobile apps. This service allows you to generate revenue by displaying banner ads, which overlay a designated area on the screen. These ads could be your own ads promoting other apps you’ve developed, or ads from other businesses providing you with revenue each time a user clicks on them or installs the advertised application. The alternative to banner ads are interstitial ads which appear as full-screen pop-ups at the entry or exit points of your app.

You can also combine in-app advertising with in-app purchases by displaying ads within the free app version and charging for an add free premium version.

Know your users and have a plan

In order to choose the best app revenue model you have to use an app analytics tool such as Google Analytics or Flurry. Tracking data will help you to create a measurement plan and determine which monetization model fits your app best.